Monthly Archives: July 2007

India has Problems Too

With all the negative attention that China has been getting lately, I only thought it fair to point out that before you think of jumping ship to one of its closest neighbors, India, it also has its share of problems.

According to Speeding Up, but still not ahead in the Business Standard, despite their increasing presence in the global market, the Indian IT firms still have a way to go before they can play with the global giants.

The reasons for this are the rupee appreciation (it’s worth whole cents now!), wage inflation (since all of the IT outsourcing has increased the size, and wealth, of the middle class), high attrition rates (still not enough skilled talent to meet demand), and skill shortages (an estimated shortage of almost 500,000 qualified employees by 2009).

Then there’s Is India Too Big to Fail? in Knowledge @ Wharton, which reviews Edward Luce’s In Spite of the Gods: The Strange Rise of Modern India which notes that India is holding itself back because of an unwillingness and almost inability to take decisive collective action.

This is partly due to the fact that it seems that India has given a higher priority to stability than it has to efficiency. But likely more due to the fact that India has a deeply entrenched culture of pluralism. Whereas China has one script, one official language, and very little religious division, India has 18 official languages, several different scripts, and deep religious and caste divisions. Makes it very hard to even contemplate agreement, let alone reach one.

And there’s The Dark Side of the Moon: The Downside to India’s Economic Rise which reviews Niranjan Rajadhyaksha’s book The Rise of India. The article starts off by pointing out, as highlighted in the book, five major issues that India has to deal with if it wants to become a true player in the global economy: poverty trends (at least 25% of its population live below the poverty line), income inequality (all of the outsourcing has created a middle class that is almost rich in comparison), energy (it is a high-octane economy that has to import over 70% of its petroleum), employment (not enough skilled people to meet needs), and infrastructure (not near enough).

I could go on, but I think you get the picture. There might be challenges in dealing with China, but challenges exist with every off-shoring and Low-Cost Country. So don’t jump ship just because the boat starts to rock. Do a careful comparison of the advantages and disadvantages, build a total cost and a total value model, and perform a careful analysis before making a decision to go to a new off-shoring destination. Even if you run into problems now and again, staying the course might be the best thing to do.

The U.S. Bureau of Labor Stastics is Wrong. Dead Wrong!

Over on Supply Excellence, Tim Minihan posted a VERY SERIOUS piece entitled Purchasing is Dead. (And Other Conspiracies.) that calls to light the recent injustice of the Bureau of Labor Statistics to supply and spend management professionals everywhere! It’s so devastating, that I asked for kind permission to re-post Tim’s original blog post in its entirety, since I do not have the time to dig into the atrocity contained within today. I encourage you to read this post in its entirety and take the action he suggests. Thank you!

As proof that you can’t believe everything you read, the U.S. Bureau of Labor Statistics reports that overall employment for purchasing and supply managers is expected to “grow slower than the average for all occupations through the year 2014.”


  • Don’t tell that to the VP of Procurement and Operations at a Massachusetts-based manufacturing company I met with last week. He was griping “I can’t find people with the right talent fast enough.”
  • Or the U.K.-based procurement executive that worried that his veteran team lacked the skill set required to compete in today’s global and technology-proficient marketplace: “Many of our [supply management] team have been doing purchasing a certain way for decades. They are uncomfortable with adopting new processes and systems. I am concerned about driving adoption.”
  • And certainly keep it a secret from the hordes of CPOs that have sounded the alarm on talent poaching occurring in their ranks.

In fact, in a recent study of top purchasing and supply management executives, Aberdeen Group outright refutes BLS’ claims, reporting that ” top CPO’s rank recruiting, training, retaining, and aligning their organizations as their #1 goals.” (Download a free copy of the full report here.)

BLS’ errors don’t stop there. The government agency goes on to wrongly report that “demand for purchasing workers will be limited by improving software.” On the contrary, every recent study on supply management employment trends reports that technical skills and experience implementing, managing, and using procurement and supply management software are among the most in demand. (Listen to Professor Joseph Carter of Arizona State University and the Center for Advanced Purchasing Studies’ views and advice on the supply management talent issue.)

Pulled from 2004 assessments, the overview makes working in a salt mine seem more attractive than joining the purchasing ranks. (Although, BLS is positive about working conditions for purchasing employees, stating that “most work in comfortable offices.”) Case in point: the agency’s stats for purchasing compensation is also way off the mark when compared to recent annual salary surveys from ISM and Purchasing magazine. BLS reports the average purchasing/supply management salary at $72,450 while the Purchasing survey found it to be $83,205 and the ISM survey found it to be $88,380.

BLS’ assessment is not only wrong, it casts the entire purchasing and supply management discipline in a bad light. (And just as the C-suite is beginning to recognize the critical importance of the function.) With the purchasing getting such a bad rap as a career choice, the talent crunch in this sector will only get worse.

What can you do? In addition to improving your recruitment, training, and retention approaches, write or call the Bureau of Labor Statistics and demand they correct this egregious mistake. The agency has a special “hotline” set up to field “complaints concerning information quality.” And, when it comes to their 411 on purchasing there is a serious quality issue.

Lodge your complaint via e-mail: Be sure to identify the information quality issue (see above), how it is negatively impacting your organization (ditto), and provide references on how the data can be improved (double ditto).

Your action can help secure the continued growth and enhance the profile of the purchasing and supply management profession!

Thanks Tim for this great piece of investigative work and bringing this injustice to the profession to light!

The Coupa Sunflower Starts to Blossom

Coupa, who just hosted their first webinar, is still heads down in their quest to make their enterprise e-Procurement application better and better by the day, and still succeeding. Now covering the full order management cycle from requisition to two-or-three way reconciliation, the only thing it doesn’t do yet, at a basic level, is payments. However, you can export your purchase orders, invoices, and goods receipts to an XML, or CSV, file and integrate into your e-Payment system that way. It even has the option to track tax codes, which will simplify you tax reclamation processes. They have begun directing mid-size organizations to their hosted e-Procurement
application as well, as they build up to a rumored major announcement
slated for early September.

For a product that’s been out of the gate for less than a year, it’s come a long way. With it’s built-in basic RFP capabilities, which will soon support direct supplier entry of relevant bid and product information in addition to the e-mail based interface it already supports, you have the option of starting with an RFX or a purchase order (template). When the order arrives, you can generate a goods receipt for three-way matching, and the system can be configured to automatically send the buyer a notice when an invoice is submitted if they haven’t confirmed receipt of the goods or service.

And you don’t have to take my word for it anymore – you can ask for
references from one of their clients if you feel it’s necessary. But with their low price point, you might just consider buying it to try it. Coupa has adopted the low-cost per-user model made popular by SalesForce, SuccessFactors, and others. Their ultimate goal, for larger organizations, is a price-point less than some organizations are still paying for their e-mail inboxes. Speculation on pricing from nervous e-Procurement competitors continues, but I have it on very good sources an average organization can expect per-seat pricing of slightly less than $40 per user per month (with a minimal commitment) – or not much more than the cost of hosted e-mail and calendar functions with IT support for many organizations – for a fully featured e-Procurement system.

Plus, unlike hosted behind-the-firewall solutions, you get updates and constant improvements for free. Coupa intends on releasing a series of minor updates to their solution between now and the fall, when the next major version of their enterprise platform will likely be released. What can you look for? Although an update schedule has not been finalized, since Coupa believes on implementing commonly requested feature first, you can expect streamlined payment system integration, more built-in reporting, and more pre-enabled punch-outs in the coming months. Add this to their newly completed filter-based budget reporting, enhanced approval workflows (with approval limits), tolerance-based invoice matching, multi-currency support (including the ability to integrate with the Bank of New York exchange rate web-service on a regular basis), improved survey and template creation, and extremely-fine grained roles-based security (with template support), and the solution footprint has considerably improved.

So, if you’re looking for an e-Procurement system, be sure to check it out. You might just find what you’re looking for. And when it comes to constant improvement, you can be sure they’re going to Coup-at-it

Two Great New Optimization Resources

For those of you looking for a good introductory overview of decision optimization for strategic sourcing, two new resources hit the bit-stream today.

First of all, there’s the “What is Supply Chain Optimization?” (Part I and Part II) podcast, part of the Next Level Purchasing‘s podcast series that features Charles Dominick (Pro to Know), President of Next Level Purchasing (a Supply & Demand Chain Executive 100 Company) and yours truly. (For more details, see today’s edition of the Next Level Purchasing newsletter.) Clocking in at just under an hour, we try our best to convey the basics of strategic sourcing decision optimization and why it’s important to you as a sourcing / procurement / supply mananagement professional. For those of you who find the podcast quite dense (it is!), and wish to review one or more sections, you’ll be pleased to know that a free transcript (basic or with editorial notes) is available, sponsored by Sourcing Innovation.

Secondly, over on the eSourcing Wiki (which, as of today, has 18 wiki-papers on various topics relevant to you as a sourcing professional with more on the way), the Strategic Sourcing Decision Optimization wiki-paper is now available, sponsored by Iasta. Along with an introduction to optimization, including strategic sourcing decision optimization, it also overviews the benefits and ten strategies for success.

When you add both of these resources to the ever increasing archive of decision optimization blog posts here on Sourcing Innovation, I believe (or at least I hope that) you finally have the resources you need to start understanding what strategic sourcing decision optimization is, is not, and why it’s important. Especially when you consider that Emptoris gives you nothing and CombineNet primarily gives you academic papers in their learning center, which, although great, are too advanced for those of you looking for an introduction that you can understand as a non-academic and non-optimization researcher.

Avoiding Risk Management Pitfalls

The Supply Chain Management Review recently posted an excerpt from an article by Jayashankar M. Swaminathan and Brian Tomlin that summarized six common pitfalls and strategies for avoiding them that’s worth a quick look. In How to Avoid the Risk Management Pitfalls, the authors summarized the following pitfalls and their mitigations:

  • Assuming disruptions can only occur when operating at normal strengths.

    Disruptions can occur at any time – even when you are in the process of recovering from a disruption. Human-caused disruptions in your supply base and natural disasters can happen at any time.

  • Assuming yours is the only company affected by a disruption.

    If the disruption is caused by a natural disaster, chances are other suppliers are also affected. For example, if a tsunami wiped out 25% of the cocoa crop along the west coast of Africa, then your back-up supplier is likely to have just as much of a problem meeting your needs as your current supplier and your emergency supply, if attainable, might cost considerably more than you originally planned for.

  • Ignoring the supply risk associated with demand-pooling tactics.

    Demand-pooling strategies might work great under normal circumstances, but they can lead to a false sense of security since they might serve only to understate the seriousness and immediacy of a disruption should one occur.

  • Ignoring demand risk when choosing a supply-continuity tactic.

    Just as you need to factor in supply risk when evaluating demand pooling, you need to factor in demand risk when evaluating supply-continuity because supply-continuity can seriously increase your demand risk. Insuring significant supply can be costly, and if the demand never materializes, this can result in a significant loss.

  • Allowing managers’ risk attitudes and timelines to determine strategy.

    Managers can vary widely in their tolerance for risk, from extremely lax to dangerously intolerant. Furthermore, even if a manager is willing to invest in supply-chain resiliency, a manager’s choice of tactics can be strongly influenced by his tolerance for risk. Good risk management entails having the right strategies in place for each identified risk, whose cost and effort should be dependent on the probability of the risk occurring and the financial damage that could be caused by the risk materializing.

  • Building short-term resiliency at the cost of long-term vulnerability.

    Supply risk management is not effective if only performed as an intermittent activity carried out every few years on an irregular basis. A good risk management strategy today might not be a good risk management strategy tomorrow. As the authors note, you need to be continually vigilant in scanning for changes in your operating environment that may necessitate adjustments to your resiliency strategy.

I summarized some good strategies and tactics to manage demand and compliance risk in this post back in April. Some of the better strategies and tactics include:

  • Supply Buffer Management
  • Cycle Time Reduction Strategies
  • Collaborative Processes
  • On-Going Screening and Quality Control Processes
  • Continual Training
  • Regular Supply Chain Audits

In addition, as I summarized in this post that summarized Aberdeen’s supplier performance and risk management benchmark report, there are a number of enablers that you can implement to improve your risk management program management. These include:

  • Supplier Scorecarding and Reporting
  • Automated Calculation of Key Supplier Performance Metrics
  • System Notification of Performance Issues & Disruption Events
  • Integration with Spend Analysis Tools
  • Reporting of Key Supplier Operational and/or Financial Risks
  • Web-Based Portal for Supplier Self-Registration & Information Maintenance
  • Insurance Solutions